Evaluation of realized investments in fixed assets in the upper Danube region

Размещено на http://www.allbest.ru/

EVALUATION OF REALIZED INVESTMENTS IN FIXED ASSETS IN THE UPPER DANUBE REGION Paper work is a part of the project researches 46006 - Sustainable agriculture and rural development in function of Republic of Serbia strategic goals achievement within the Danube region, financed by the Ministry of Science and Technological Development of Republic of Serbia.

Jonel Subiж Jonel Subic, Ph.D., Assistant Professor, Researcher Associate, Institute of Agricultural Economics, 15 Volgina Street, 11060 Belgrade, Serbia, phone: +381 (0)11 297 2854, e-mail: jonel_s@mail.iep.gb.ac.rs, Marko Jeloиnik Marko Jelocnik, M.A., Researcher Assistant, Institute of Agricultural Economics, 15 Volgina Street, 11060 Belgrade, Serbia, phone: +381 (0)11 297 28 52, e-mail: marko_j@mail.iep.bg.ac.rs, Lana Ivanoviж Lana Ivanoviж, M.A., Researcher Assistant, Institute of Agricultural Economics, 15 Volgina Street, 11060 Belgrade, Serbia, phone: +381 (0)11 297 28 52, e-mail: lana_i@mail.iep.bg.ac.rs

Republic of Serbia

ANNOTATION

unemployment serbia investment industry

Republic of Serbia is currently in the central phase of transition that should represent a radical turning point for the future development of national economy and its actors. Development of market economy can be accelerated by the inflow of funds through investments in new enterprises, recapitalization of existing companies and consolidation of financial system. However, many enterprises in the Republic have unfavorable business performances that are manifested through declining of market share and profitability, increase of indebtedness, inadequate investment and increase of number of diversified business activities at the expense of the primary business. Disintegration of former Yugoslavia, war on its territory and then transition, caused the closure of many companies (or functioning with a significantly reduced capacity) in the Upper Danube area. Although is established a growing investment trend, macroeconomic indicators related to investment processes in Serbia show a high risk of investment in local companies, what disable more dynamic investment.

According to the Draft Spatial plan of the Republic of Serbia (2010): spatial integration and functional connection of regional unities, that are necessary for achieving of greater territorial cohesion within Republic, but for strengthening of the developmental capacities and greater competitiveness of its all parts, refers to the identification of developmental zones. One of them is the Danube belt - wider area functionally directed or linked to the Danube River, also including the area along the Sava River.

Business environment in the area of Upper Danube (Sombor city, Baи and Apatin municipalities), Autonomous Province of Vojvodina and whole Serbia is much improved thanks to the adoption of large number of legal regulations since 2001. General objectives of national legislative reforms, that take place in accordance with the EU regulations, are focused on business simplicity and investment security. Within the accession process to EU, adoption of number of new regulations are expected, where for investors the most important will be laws in the area of land usage and construction, as well as regulations concerning industrial and technological parks establishment.

In this paper are presented long term trend of total realized investments within the area of Upper Danube region (mostly on narrower territory that relies to the Baи municipality) and characteristics of the investment processes in the economy of the Juћnobaиki district, Province of Vojvodina and whole Serbia. Accordingly, authors were evaluating the realized investments within the economy of Baи municipality, Juћnobaиki region, Province of Vojvodina and whole Republic.

Key words: investment, fixed assets, Upper Danube region, Baи municipality, Republic of Serbia

Market size, macroeconomic stability, business costs, human resources, geographical location and investment infrastructure are the most important factors that define the Upper Danube region (with accent on the Baи municipality) as one of the very attractive business location in this part of Southeast Europe.

To investors are offered a relatively good potential for realization of many products of national economy, both at the world and Serbian market, which comes from duty-free access to EU, USA, Russian and Eastern Europe market (nearly one milliard of consumers).

Business costs in Republic of Serbia are relatively more favorable compared to other countries in the region, what is the result of: www.siepa.sr.gov.yu

- lower tax rates, such as: income tax - 10%; value added tax - 8%, or 18%; and salary tax - 12%;

- umber of incentives for investment: including public subsidies for direct investments per new employee, between 2.000-10,000 EUR; exemption of income tax for a period of 10 years for big investments; as well as exemption of salary and social security tax for employees younger than 30 and older than 45 years;

- cheaper utilities (products and services), such as electricity, gas or water;

- labor quality and costs, that are by general opinion of investors, one of the key reasons for investment in Baи municipality and whole Serbia. Human resources in Serbia stands out by: high productivity that, within the industry, grows in average for 11% per year; excellent technical education, where 1/3 of about 14.000 graduate students each year comes from the faculties of life sciences; much lower labor costs, which are less than 50% of expenditures for wages within new EU member states from Eastern Europe.

General characteristics of previous investments

Observing the period 2000-2005, it can be concluded that the Baи municipality is characterized by weak and insufficient investment activity. However, total investments at the municipality level in 2005 were more than tripled related to achieved value in previous years. In other words, they were in 2005 around 129.662.000 RSD, in compare to 38.371.000 RSD of realized investments in 2000 (Table 1). On the other hand, total investments in Baи municipality in 2005 covered just 0,86% of realized investments in Juћnobaиki district, or only 0,44% of total investments at the AP Vojvodina level, or barely 0,08% of total investments realized on the Republic level.

Table 1 - Spatial distribution of total investments* in period 2000-2005 (in 000 RSD)

* Investments in fixed assets (data are related to public, cooperative and mixed ownership), in current prices.

** Data for KiM are not observed.

Resource: Investments in Republic of Serbia, 2000-2005, RZS, Belgrade, 2001-2006.

According to presented long term trend of total investments in absolute values, it could be derived the average annual growth rates for selected territories. In that context, it was came to the average annual growth rate of total investments in Baи municipality (27,57%), Juћnobaиki district (32,49%), AP Vojvodina (28,47%) and whole Serbia (32,61%). In all cases annual growth rates were positive, while its highest value was recorded at the Republic level (Chart 1).

Chart 1 - Average annual growth rate of total investments* for the period 2000-2005 (in %)

* Investments in fixed assets (data are related to public, cooperative and mixed ownership), in current prices.

** Data for KiM are not observed.

Resource: Investments in Republic of Serbia, 2000-2005, RZS, Belgrade, 2001-2006.

Starting from 2006, the Statistical office of Serbia has published the data about investments in fixed assets of legal entities of all types of ownership in current prices. According to new methodology, total realized investments in Baи municipality in 2007 were more than doubled than the achieved value in the previous year. In other words, in 2007 they were around 616.551.000 RSD, in compare to 299.821.000 RSD of realized investments during 2006 (Table 2). On the other hand, total investments in the Baи municipality in 2007 covered just 1,62% of realized investments in Juћnobaиki district, or only 0,53% of total investments at the AP Vojvodina level, or barely 0,13% of total investments realized on the Republic level.

According to presented long term trend of total investments in absolute values, it could be derived the average annual growth rates for selected territories. In that context, it was came to the average annual growth rate of total investments in Baи municipality (105,64%), Juћnobaиki district (4,68%), AP Vojvodina (22,43%) and whole Serbia (41,53%). In all cases annual growth rates were positive, while its highest value was recorded at the municipality Baи level (Chart 2).

Table 2 - Spatial distribution of total investments* in period 2006-2007 (in 000 RSD)

* Investments in new fixed assets (data are related to all legal entities, except those one that are classified as small, according to Law on accounting and audit - article 7), in current prices.

** Data for KiM are not observed.

Resource: Investments in Republic of Serbia, 2006-2007, RZS, Belgrade, 2007-2008.

Chart 2 - Average annual growth rate of total investments* for the period 2006-2007 (in %)

* Investments in new fixed assets (data are related to all legal entities, except those one that are classified as small, according to Law on accounting and audit - article 7), in current prices.

** Data for KiM are not observed.

Resource: Investments in Republic of Serbia, 2006-2007, RZS, Belgrade, 2007-2008.

Although the average annual growth rate of realized investments, on the territory of Baи municipality in the period 2006-2007, is remarkably above average annual growth rate of the observed indicators on the wider territory, share of realized investments in Baи municipality in the realized investments for whole Republic is only 1,62 times greater, in mentioned period, in compare to the period 2000-2005. In other words, it came to decrease of investment activity that was affected the reduction of economy growth on municipal territory, in regard to economic development within whole Serbia.

Evaluation of realized investments in fixed assets

National market, therefore the territory of the Upper Danube region (in particular Baи municipality) is relatively important from the regional aspect, but it is very narrowed according global relations (still limited by small purchasing power of the local population). Serbia generally does not have, in wealth, some cheap strategically important natural resources, where still stands 4.217.863 ha of used arable land (or, 25.842 ha in the Baи municipality), but qualified labor force that was always emphasized as an Serbian advantage showed in generally obsolescence and insufficiently trained for the new technological processes, but also much expensive because of the different fees and social programs.

Quality of general business and investment climate within Serbia is mediocre with the deterioration trend in last two years, as by the World Bank and International Finance Corporation (so-called business simplicity) ranking, Serbia is in 2009 on 94^th place in the world (out of 181 countries), what is practically comeback to the position it had after the ranking for 2006 (95^th place) and significant deterioration compared to the position it had in 2007 (68^th place). After the ranking for 2008, Serbia was on the 86^th place.

In order to determine the rating of investments realized within the economy of Baи municipality, following indicators will used:

- realized investments in economy per capita;

- realized investments in economy per active resident;

- realized investments in economy per employee.

For obtaining of more realistic evaluation of investments made within economy on the territory of Baи municipality, in next table (Table 3) are given indicators that are related as to the regional, as well to the national level (in 2007).

Table 3 - Evaluation of realized investments * in economy

* Investments in new fixed assets (data are related to all legal entities, except those one that are classified as small, according to Law on accounting and audit - article 7), in current prices.

** Data for KiM are not observed.

Resource: Investments in Republic of Serbia, 2006-2007, RZS, Belgrade, 2007-2008.

Results presented in previous table are referring to the fact that in all observed cases, the greatest value were achieved in realized investments per employee, while the lowest value were obtained in realized investments per capita, in the following relation:

- Republic of Serbia (3,74:1,00);

- Autonomous Province of Vojvodina (3,84:1,00);

- Juћnobaиki district (2,78:1,00);

- Baи municipality (4,55:1,00).

According to selected indicators and gained investment relations, it is obvious that the greatest investments per employee are in the Baи municipality. This confirms the fact that the share of number of employees in the total population is the lowest in the Bac municipality (22,00%), compared to other territorial units (Juћnobaиki district 35,96%; AP Vojvodina 26,05% and Republic of Serbia 26,71%).

Therefore Baи municipality has more expressed unemployment than other observed territorial units, what means need to increase its openness to national and foreign capital to enlarge its development perspectives, particularly in the field of employment (creation of new jobs).

Conclusion

Having in mind process of EU enlargement and its' positive perspectives for Serbia, it is evident that in future development of national industry investment activity will have a crucial position. Investments play a decisive role in realization of goals and priorities of economic and social development, primarily as a driving tool of quantitative and qualitative growth of complete production and production factors, but also for creation of better life conditions for local population.

At this stage, the growth of investment is not only a requirement of technical and technological modernization, but also one of the basic conditions of economic stability of the national economy. Without adequate volume and designed structure of investments it could not be provided growth of fixed assets and working capital, increase of employment and used equipment efficiency, better productivity, diversification of production, etc., as on municipal and regional, as well on national level.

Observed as a way of saving on cash expenditures, the investments have to be realized in a form that will ensure maximum exploitation effectiveness, in other words higher level of achieved effects per unit of investment financial assets. Creation of investment decisions in business practice should be, regardless of economic conditions, always based on strict quantitative and qualitative regulations, which will provide precise leading of cash expenditures or investment in the best (most effective) project variants.

Within the period 2000-2007, investment trends indicate strong correlation between the Serbian political credibility and investment risks. Observing the area of the Upper Danube region (specifically, the Baи municipality), still does not come to a greater input in the form of transfer of modern technology, equipment and production management, and according to that greater increase of the total technological and innovative capacity.

Despite the fact that there is certain openness to any investor, in next period exist need for additional efforts that have to be directed towards foreign direct investment attraction, what would significantly increase the growth rate of GDP and decrease current unemployment.

Literature

1. Investments in Republic of Serbia, 2000-2005, RZS, Belgrade, 2001-2006.

2. Investments in Republic of Serbia, 2006-2007, RZS, Belgrade, 2007-2008.

3. Strategy of social-economy development of Baи municipality for the period 2009-2014, assembly of Baи municipality, 2009.

4. Subic J., Done I., Andrei J., Matei Mirela (2009): Investments and Economic Movements in The Republic of Serbia: Status Analysis of Apatin Municipality. Proceedings of the 12^th International Business Information Management Association Conference - „Creating global economies through innovation and knowledge management: theory & practice“, IBIMA, USA, pp. 1092-1096.

5. Subiж J. (2009): Investments, Strategy of social-economy development of Baи municipality for the period 2009-2014 (section 5.10. in chapter 5 - Economy, pp. 91-100), assembly of Baи municipality.

6. www.bac.rs

7. www.siepa.sr.gov.yu

8. www.vojvodinaonline.com

9. www.worldbank.org

Размещено на Allbest.ru